As if there was any doubt before which way the arrow of control, and particularly causality, points in America's financial system, the following stunner just released from Bloomberg confirms it once and for all. According to Rebecca Christie and Craig Torres, the New York Fed has issued a survey to Primary Dealers, which asks
for suggestions on the size of QE2 as well as the time over which it would be completed. It
also asks firms how often they anticipate the Fed will re-evaluate the program, and to estimate its ultimate size. This is nothing short of a stunning indication of three things: i) that the Fed is most likely completely paralyzed due to the escalating confrontation between the Hawks and the Doves, and that not even Bernanke believes has has sufficient clout to prevent what Time magazine has dubbed a potential opening salvo into a chain of events that could lead to civil war: in effect Bernanke will use the PD's decision as a trump card to the Hawks and say the market will plunge unless at least this much money is printed, ii) that the Fed is effectively asking the Primary Dealers to act as underwriters on whatever announcement the Fed will come up with, and thus prop the market, and, most importantly, iii) that the PDs will most likely demand the highest possible amount, using Goldman's $2-4 trillion as a benchmark, and not only frontrun the ultimate issuance knowing full well what the syndicate of 18 will decide in advance of what the final amount will be, but will also ramp stocks on November 3 to make the actual QE announcement seem like a surprise. This also means that the Primary Dealers of America, which include among them such hedge funds as Goldman Sachs, such mortgage frauds as Bank of America, such insolvent foreign banks as Deutsche, RBS, UBS and RBS, and such middle-market excuses for banks as Jefferies, are now in control of US monetary, and as we explain below fiscal, policy.

It also means that the Fed has absolutely no confidence in its actions, and, more importantly, no confidence in how its actions will be perceived by the market which is why it is not only telegraphing its decision to the bankers, but is having its decision be dictated by them, an act so unconstitutional it would be seen as treason in any non-Banana republic! This is the last straw confirming that the only ones left trading the market are the Fed and the PDs, passing hot potatoes to each other, and the HFTs, churning the shit out of everything else to pretend someone is still trading.

And the saddest conclusion is that this is the definitive end of US capital markets: not only is the Fed's political subordination a moot point, but the Fed, and the middle class' purchasing power via the imminent dollar destruction that is sure to follow as the PDs seek to obliterate their underwater assets by raging inflation, is now effectively confirmed to be a bitch of Lloyd Blankfein and his posse.

The official explanation for this unprecedented incursion by the banking crime syndicate in US monetary policy is as follows:

Avoiding Disruption

Treasury officials say they want to avoid any disruption to the $8.5 trillion market in U.S. government debt, the world’s most liquid, as the Fed weighs restarting large-scale asset purchases. The Treasury also doesn’t want to give any impression to investors, particularly those based overseas, that it might be coordinating with the Fed to finance the national debt.

“Treasury debt-management decisions are designed to deliver the lowest cost of borrowing over time and are entirely independent from monetary-policy decisions made by the Federal Reserve,” Mary Miller, assistant secretary for financial markets, said in an e-mail to Bloomberg News yesterday. Before joining the Treasury last year, Miller was head of global fixed- income portfolio management at T. Rowe Price Group Inc. in Baltimore.

The Treasury is scheduled to hold its quarterly meetings with bond dealers tomorrow, ahead of the department’s Nov. 3 refunding announcement.

Fill in the blank: the Fed has essentially given PDs the option of $250BN, $500BN or $1 trillion in monetization over six months. It is now absolutely clear that the PDs will pick the biggest number possible... which incidentally amounts to $2 trillion per year, and is precisely what Goldman's downside case was, as we presented previously.

The New York Fed surveyed primary dealers required to bid in U.S. debt auctions. It asked dealers to estimate changes in nominal and real 10-year Treasury yields “if the purchases were announced and completed over a six-month period.” The amounts dealers can choose from are zero, $250 billion, $500 billion and $1 trillion.

Of course, since a $2 trillion purchase over 1 year means the Fed will have to monetize every single bond issued, the SOMA limit will have to be raised, another prediction we made months ago:

The Fed is unlikely to buy up the entire supply of new securities, although it may adjust its internal guidelines of how much it can hold of any given issue. The Fed limits itself to owning no more than 35 percent of any specific security it holds in its System Open Market Account, or SOMA.

“Our Treasury strategists point out it could also cause pricing distortions along the curve, if, for example, the Fed continues to target a 40 percent purchase concentration in the 6-10 year maturity bucket, as it has in its recent purchases,” analysts at JPMorgan Chase & Co., including Alex Roever, wrote in an Oct. 22 research report. The report predicts the Fed will buy about $250 billion a quarter during the easing campaign.

How about $500 billion?

And, incidentally, since the "independent" Treasury will be forced to issue more debt to fill all the demand for $2 trillion over the next 12 months, as there is not enough debt in the pipeline to fill $2TN worth of demand and prevent the entire curve pancaking at zero (i.e., the 30 year yielding precisely 0.001%) it also means that the government will be forced to come up with more deficit programs, which also means that primary dealers will now also determine US fiscal policy.

Which begs the question, why is anyone pretending that the political vote on November 3 matters at all?

Below are the 18 banks that, in a completely separate vote, will henceforth rule America, regardless of what particular puppets end up in the Congress and Senate:

Air Fuel Ratio Sensor SWR, I followed your comments over at KD's site and found I usually agreed with you. That was a prescient article especially for it's time. 2 trillion stands on the Fed's balance sheet currently, add another $4 trillion and we do in fact arrive at $6 trillion. But that is most likely a low estimate, they will in fact be forced to further devalue the dollar, probably until it just snaps one day in a crisis of confidence. Again, you have stated this over and over in KD's site. Kudos.

What I really wanted to say was I don't think TJ or any of the founders would be at all surprised were they alive today. They wrote about what would inevitably happen while they were still breathing. No, if you woke them out of their sleepy graves and told them what was happening they'd say, "what the hell did you expect," roll over, and go back to sleep.

It's not like this is the first time this has happened. Good read: 13 Bankers

Haven't read it, but based on commentary - it's junk. Its base premise is the same faulty premise made by those that created the Federal Reserve in the first place - that the corruption in the financial industry is the fault of free market capitalism; with the conclusion that it's up to government to keep the industry in check.

It's ironic, BTW, that on the actual website of the 13 Bankers book, it presents the airline industry as an efficient example of how an industry should be managed by the government:

Over the last 50 years, the FAA, the airline manufacturers, and the airlines worked together to make a highly complex air travel system more efficient and much safer. If you’ve ever wondered why, in contrast, our financial regulators and banks made our financial system less efficient and much more dangerous, you should read this book.

Yet this is quite counter to one of the book's primary recommendations:

The alternative is to confront the power of Wall Street head on, which means breaking up the big banks and imposing hard limits on bank size so they can’t reassemble themselves.

(emphasis in original).

Hmmm - I'd be curious then to see Johnson and Kwak (authors of 13 Bankers) produce a list of what were the original larger airlines that the current airlines were split up from. I'm not aware of such forced breakups.

Yeah, I subscribed to their feed until the weird feeling I got going there erupted into an "aha" moment of recognizing--wait a minute, these guys aren't free market, they're just arguing about who should be in charge! Maybe they're sending out a copy of their resume with the book as they mail it to Ben Bernake...

"I can't stand this indecision, Married with a lack of vision, Everybody wants to rule the world..."

Hopefully, spreading it to as many family, friends and colleagues as will listen! (And even those who don't want to listen!). The depth of info here gives enough ammunition to answer the usual objections raised by the ignorant.

Even during the revolutionary war, less than 10% of the citizens actively fought against the British.

But that doesn't mean that only those 10% were awake or aware of what was going on. And the comparison is useless anyway because there was a clear, and nearly equal, divide in the citizens between those who saw themselves as loyal British subjects and those who felt they were no longer bound by British law since they weren't represented in the making of British laws.

Even if we were to wake up 10% of the population, which is probably a fairly accurate count at the moment, they would never be able to overcome the rest of the voters who "just do not get it".

Please describe to me what you mean by "wake up" because even here on ZH there are plenty of people who are not "awake" to all that's going on. Don't judge ZH by the comment section when less than 8% of the people who read ZH comment on ZH.

I arrive at this percentage based upon the number of "reads" (as a contributor I see the "reads" number) of an article, which doesn't filter out people who return repeatedly to the article so the "reads" number is over stated, and the number of unique comments left. There might be 200 comments, but that doesn't mean there are 200 unique comments. Many people leave multiple comments.

Besides, people "just don't get it" because they don't wish to get it. They sleep not because they are ignorant, but because they are willfully ignorant. BIG difference.

Please describe to me what you mean by "wake up" because even here on ZH there are plenty of people who are not "awake" to all that's going on.

Besides, people "just don't get it" because they don't wish to get it. They sleep not because they are ignorant, but because they are willfully ignorant. BIG difference.

in the end, there are three types of folks:

1. those who wish to be ruled, and prefer not to think about whether or not their overlords will lead them to their own extinction.

2. those who wish to rule, believing that this is their only way to survive long-term.

3. those who do not wish to rule or be ruled, wishing only to improve their probability for peaceful long-term survival without deliberately murdering the competition in the process.

perhaps #2 is most realistic, but #3 is most ideal where it is even possible.

I've always said that my belief in liberty extends to my own child in this way: if she is smart and hard working then she will do great. if she is smart and lazy then she will do fine. if she is dumb and hard working she will be fine. if she is dumb and lazy, then she has failed humanity and should not expect to be rewarded with liberty or survival at someone else's expense. Smart folks bring good ideas. Hard-working folks pull their weight and more. This is peaceful progress; any alternatives are unjust, in my mind.

CD, since I only have 12 hours a day to devote to ZH I have to be finicky about what I comment on, even though I read nearly every article. Your points are well taken, but I think the 8% may be skewed since there is no breakout of the "regulars" who post comments and those who read only. Anyhow, thanks for your observations.

What about hacking into the time square billboard? Or getting Tyler(s?) on CNBC?

On a more serious note: What chain of non-revolutionary events could possibly lead to the abolishment f the Fed? It is beginning to look to me as if only a major disruption in the food supply chain would be sufficient to bring the system to its knees. And even then I wonder. Would starving, ignorant America choose food over liberty and if so would enraged enlightened America let them? I fail to see how a 2nd Civil War can be avoided.

You can be damn sure that there will be a "major disruption to the food supply chain" in the not-too-distant future ... it is part of their master plan! However, by that time, they will also have nationwide martial law in place.

Action needs to be taken before the situation gets to that point. My suggestion is to use whatever time and influence you have to mobilise your state to secede and re-take control of its National Guard before it happens. Without the states' participation, there is no Fed or federal government.

Who's to say that mgt of these companies won't take gargantuan cuts off the top for themselves, leaving minimal to zero profit--screwing stockholders while they make out like bandits?

I know you're saying buy stock in the Mafia that's running the casino after they've bought off the gaming commission--but why play that game at all if the Mafia decides what that stock is going to be worth?

Good point: a lot of these guys are yield deficient, and their asset quality leaves a bad taste. However, there is something to be said for being on the side of guys that are able to raise over a billion dollars on a 50 year bond. Whether this can blow up in Goldman's face is irrelevant. That they did it leaves me somewhat speechless.

Adding Goldman to a portfolio is a smart thing. Amazingly less pissed off. Helps in thinking less emotionally, more clearly.

against who? they've left the country on their private jets or are on their private islands. Maybe we can all go to the Hamptons or Connecticut or NJ if you're on the east coast and to Bill Gross's house if you're on the west coast.

I've always had this vision of thousands upon thousands of peasant people storming the fed, each with a chisel in one hand and a hammer in the other. We would then symbolically and literally take the fed apart one piece at a time. Perhaps some out of work construction person would bring his jackhammer to help speed things up. Sadly, it remains only a vision.

I should have included the obligatory "imho"....but it is a toss up for me...the 'mats, when they were "on", could blow you away....the 'burbs were more consistantly "on" and fun...imho from all the shows/gigs I attended...:)

I was wondering why China came out and 1) said that it might go more GLD than $ and 2) that printing $ was inflationary to the world - ie them and causing 'them' harm with their economy.

*

Then I see the Helicopter Ben wants to do a mini QE2 - like small yachts named titanic1 titanic2 titanic3 - over time as it were

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now we have the final piece of the story - Ben can see China from his window and its not looking very neighborly anymore in wanting to buy our shit exports - literally as well as financial and that could leave us up the creek.

That's actually a good idea. After the 2004 election I thought about voter fraud quite a bit and there are all kinds of verifiable technical solutions that would work. The problem is that for every one who wants an honest election, there is someone else who does not. Both in the populace, and in the government. So none of the solutions will ever get implemented.

Maybe if we had the option to make our vote PUBLIC--published with our name and voter # on a website...then they couldn't steal YOUR vote. But wouldn't stop the Quantitative Easing in Voting--i.e. Vote Creation. That's been going on for decades.

But now they've figured out that filling out extra paper ballots is SOOOoooooo 2000.

Perhaps you are right, but isn't it just making the system more efficient?

Money buys politicians. So, instead of requiring the citizens to go out and vote, which is a complete waste of time, why not just have money flow into diebold to determine who bought the most votes. In the end, it may save money and time.

The key here is that substituting "inflation targets" for "price stability" will be the blank check Ben has been waiting for. The numbers announced really won't matter for anything other than to give fodder to various Gerbervores and their lemmings

Fact remains that as this drags on all pretense is falling away. We are now getting a real and rare treat into how both parties are getting their; "Honey, I didn't forget the lube this time" moment of appeasement.

Big Boy Letters indeed. ROFLMAO Just wait until all of this happy crappy gets shoveled onto those even greater fools, the so called sophisticated investors. Oh man, this is gonna be nearly as good as running a sprinkler test while the fed and the pd's try and tell us the pool on the roof must have a leak

And some folks still think Jim Sinclair is a crank (Robo). His "QE to Infinity" call will be proven correct, and the naysayers will gnash their teeth (and lead the attack against the hoarders, most likely).

Well, why even pretend we are a nation of laws? Why pretend our government has anything to say about how we are ruled? Why pretend that the Constitution has meaning? Why pretend to support a nation run by banks, for banks and to their ultimate elevation as overlords of the people?

Pretty much describes our current Political leadership, The Fed , the Banksters ... and you and me . In men there is NO HOPE . None !!

Romans 3:10-18

As it is written, There is none righteous, no, not one: There is none that understandeth, there is none that seeketh after God. They are all gone out of the way, they are together become unprofitable; there is none that doeth good, no, not one. Their throat is an open sepulchre; with their tongues they have used deceit; the poison of asps is under their lips: Whose mouth is full of cursing and bitterness:Their feet are swift to shed blood: Destruction and misery are in their ways: And the way of peace have they not known: There is no fear of God before their eyes.

I would prefer Durin's Bane to what we have now Stycho. The Dark Fire is weak compared to the nation-destroying power of The Squid. Simon Johnson continues to be proven correct and still nothing is done... you almost have to laugh at this point as everything is out in the open and people don't even care about "pretending" anymore. LOL

It can't last... the only 2 things the country has going for it right now is reserve currency status and low interest rates to finance the Ponzi. QE will obliterate both of these... they will be destroying the last props holding up a very sickly system.

Soon 'whatever particular puppets end up in Congress' will be decided by money flows into TBTF banks and PDs who can hide said money in campaign contributions and purchase The Invisible Hand. How much would 'The American Way of Life' will go for at auction and what kind of yield should be expected?

Do the books, "How to Become a Canadian Anchor Baby" or "Mexican Ganglordship 101" exist?

What you say is correct and people should pay far more attention to this. I would recommend a book by Adam Tooze, called "The Wages of Destruction". The way the Nazi war machine was used in order to benefit the demands of the manufacturers pushed forward the war agenda when it became obvious that they needed to start using the materials created or the factories would become idle. I have always believed that a factor in the way the first Gulf conflict played out was the need for the US military to clear stock that had been gathering dust since Vietnam, so they had an excuse to order shiny new stuff.

When we have a situation where many of the PDs are implicated in a massive fraud against borrowers, investors and state governments, and the Fed thinks it is ok to trust them to honestly answer how much money to print for the sake of the economy - it tells me the situation is more fucked up that even I imagine. It's the last gasp of a dying regime.

A careful study of the Weimar Republic demonstrates many similarities to what's happening in the U.S. right now. The big capitalists howled at the notion that the Reichsbank should stop printing money. The stock market volume shot through the roof. The surplus currency in the system found more and more non-productive outlets like stock gambling and mergers and acquisitions, building factories that built nothing but parts used in the building of factories, etc ...

The excess money, once printed and released into the system, had to find a place to live once the legitimate productive uses for it ran dry.

This is the role of the pig-fuckers (ahem, I simply could not call them "men", sorry) on Wall St.

RoBOW your weird and i don't get you. but here in this little college town luxury goods stores are folding, like before my very eyes. my luxury beauty cosmetic store just B O O M gone overnight. replaced with skit hippie clothes. right at heart of downtown pearl street mall. no word to me as a robust buyer of all things cream and smell goods, hey lady we are closing shop this week if you want to buy up your favorite products. oh well i guess i now perceive my luxury creams etc as precious commodities. oh and my wax jobs no more.

I'm still thinking that it will not be a bazooka, although maybe they'll front load it in the earlier months. There's nothing stopping them doing it again in six months, a la boiled frog.

As you say, Bernanke and the banks will gang up on the hawks with the threat of a crash if they don't get something. The MSM has been on about 500 billion, which was my guess, but since they're probably setting low expectations, I'm going for a trillion now.

I'm to bed but I could have sworn that Helicopter Ben's main selling point in his confirmation hearings was that he had written ALL about the depression and KNEW what to do to prevent one from EVER happening. Seems his dissertation and real life are vastly different animals but then again, whenever 'theory' his the road of life it falls away to reveal reality. Funny how now in hindsight I think that we should have just let LTCM fail in the late 90s. That was the first of its kind and set the stage for later hand outs.

42,000 factories lost in America since the 4th Q of 1999 through 2nd Q 2010. Average number of workers in each of these factories? 500. What are we selling to China? Paper - waste and treasuries (also waste).

What happens if they start selling or stop buying as it seems Ben has figured out they are doing? You get a Fed that goes to PDs and begs.

It's a creepy revelation, like the scene in the 1960’s film Spartacus, where Laurence Olivier (Bernanke) tells Tony Curtis (Geithner) that some men like snails (QE) and some like oysters (a strong USD), but he likes snails and oysters. So he inquires of Tony, does Tony like snails? Or is he more into oysters? And wouldn’t he like to try some snails, just to see what it’s like...and if Tony still has doubts, look at all my friends on this PD list, why they like snails too!

With all of the historic precedence, some folks here were still calling for a low-ball QE2. Even now, this hilarious article floats a low-ball high number, just to prepare the field for the true high ball number.

what part of "credit must grow" are you cretins freakin struggling with? GFD is Douchinger running this site too???

I had this argument 2 years ago where I predicted that if private credit origination did not pick up that the government would take up the baton and MAKE you borrow.

There's no way out of this math, the credit system must grow or else. The Fed has no choice but to print the coupon and force the origination.

No, the economy won't recover, oil has peaked. It won't really gd matter what the Fed does. Just accept that and move on. Pigmen will sit at trough-head and continue to buy Ferraris. The banks own the Fed anyhow; they are the shareholders.

Yep... There is no possible way to win this game we call industrial civilization. A monetary profit system (irrespective of credit) requires infinite growth in the supply of energy into the ever cooling "warmer body" (the worker/consumer) from which a monetary (energy) profit is extracted. In order to maintain the required energy imbalance (think temperature) needed to allow the energy (monetary) transfer to the cooler body (owner of production) in a profit system of exchange. Unfortunately, this means infinite growth in the supply of energy to the system. We do this with the ever increasing production/consumption/waste of goods and services for which this energy is embodied... Unless energy supply (and the resources we shape with this energy for the production of goods of trade value) can grow infinitely, or the rate of efficiency at which we use each unit of energy increases infinitely (both impossible), the system must return to equilibrium. Entropy always wins. Unfortunately for mankind, we will only learn this most fundamenetal universal economics lesson the hard way. Good luck to you all.

Sorry, I'm not buying it. If they try $2T a year, the wheels come flying off immediately, not in 2014 or 2020 but immediately. There is no way TPTB can manage or control the economic distortions that will ensue if that level of monetization is attempted. Bernanke would quite probably literally be signing his death certificate (In the French Revolution, the tax collectors were the first ones to be strung up by the mob).

Just wait til the Tea Party rubes get a load o' Washington DC! They'll be absorbed like spit in a sponge. Power luncheons and lobbyists brown bags of cash will turn their heads in a flash. The realization that they have NO power will squash their egos and they'll be putty in the hands of TPTB.